Contingent Interest: Vested Interest - The Transfer of Property Act Deals With Two Kinds of Interest Vested

Vested interest The Transfer of Property Act deals with two kinds of interest vested
interest and contingent interest. Vested interest is to be distinguished from

contingent interest. When an interest is vested, the transfer is complete but
when the interest is contingent, the transfer depends upon a condition
precedent. When the condition is fulfilled the transfer takes effect and that
the interest becomes vested.
Definition of Vested Interest
Section 19 of Transfer of Property Act defines vested interest as
follows...
"Where, on a transfer of property, an interest therein is created in favour of
a person without specifying the time when it is to take effect, or in terms
specifying that it is to take effect forthwith or on the happening of an event
which must happen, such interest is vested, unless a contrary intention
appears from the terms of the transfer."
A vested interest is not defeated by the death of the transferee before he
obtains possession.
Explanation :
An intention that an interest shall not be vested is not to be inferred merely
from a provision whereby the enjoyment thereof is postponed, or whereby a
prior interest in the same property is given or reserved to some other person,
or whereby income arising from the property is directed to be accumulated
until the time of enjoyment arrives, or from a provision that if a particular
event shall happen the interest shall pass to another person.
Illustration
A Hindu widow adopted son but there is an agreement which postpones the
sons estate during the lifetime of widow. Here an interest created in favour of
adopted son is vested right, which does not depend upon condition
precedent, for example.. performance of any act , it is not to take effect on
happening of the event which is certain i.e. the death of widow.
The adopted son has Present proprietary right in the estate. The right of
possession and enjoyment being deferred and therefore he can transfer the
property even during the widows lifetime. Similarly, a Transfer of Property in
favour of a person simply creates vested interest with an immediate right to
the possession and enjoyment of the property. Such vested interest is not
defeated by the death of the transferee even before getting possession of

the property.
Illustration
A transfers property to B in trust for C and direct B to give possession of the
property to C when C attains age of 25 years. In this problem the enjoyment
in the property is postponed but this does not prevent the interest vesting
immediately, but such transfer is itself void when C attains majority.
Therefore C has vested interest and entitled to a possession of property at
the age of 18.
When unborn person acquires vested interest on transfer for his
benefit - Section 20
Where, on a transfer of property, an interest therein is created for the benefit
of a person not then living, he acquires upon his birth, unless a contrary
intention appears from the terms of the transfer, a vested interest, although
he may not be entitled to the enjoyment thereof immediately on his birth.
Characteristics of vested interest
1) Vested interest does not depend upon the fulfillment of a condition. It
creates present and immediate right though the enjoyment may be
postponed to future date.
2) A vested interest is not defeated by the death of transferee before
obtaining possession, it will pass on To His heirs.
3) Vested interest is Transferable and heritable.
Case Law
Sundar Bibi vs Rajendra Narayan AIR1925 All.389.
In this case the Allahabad High Court held that in a vested interest the title
passes absolutely from the transferor to the transferee at the date of the
transfer, though the enjoyment may be postponed.
Rajesh Kanta Roy vs Shrimati Sunita Debi AIR1957, S.C.255 Fact -
One Ramani Kanta Roy executed a registered trust deed in respect of his
properties. The eldest son Rajesh was appointed the sole Trustee to hold the
properties under the trust subject to certain power and obligation. After his
death his two son Rajesh And Ramendra got interest in the property. There
was a clause in the trust deed that both of them was to get interest in the
properties allotted to each other happening of the two events 1) Discharge of all the debts specified in the schedule and death of the
settler himself.
2) The trust was to come to an end on the death of settler and the son
were to get properties allotted to them there after.
Issue before the court was whether the interest created by the trust were
vested or contingent ?
A Supreme Court held that the interest taken by the two brothers under the
trust deed was vested and not contingent because it was certain event
Vested interest does depend upon fulfillment of a condition and takes effect
from the date of the transfer. In vested interest there is present, immediate
right even if the enjoyment is postponed. A vested interest is heritable and
transferable. A contingent interest depend solely upon the fulfillment of the
condition. In contingent interest there is no present right, there is a promise
to give right upon the fulfillment of a condition. A contingent Interest is
inalienable and not transferable
Contingent Interest The Transfer of Property Act deals with two kinds of interest vested
interest and contingent interest. Vested interest is to be distinguished from
contingent interest. When an interest is vested, the transfer is complete but
when the interest is contingent, the transfer depends upon a condition
precedent. When the condition is fulfilled the transfer takes effect and that
the interest becomes vested.
Definition of Contingent Interest Section. 21 defines Contingent interest as follows Where, on a transfer of property, an interest therein is created in
favour of a person to take effect only on the happening of a specified
uncertain event, or if a specified uncertain event shall not happen, such
person thereby acquires a contingent interest in the property. Such interest
becomes a vested interest, in the former case, on the happening of the

event, in the latter, when the happening of the event becomes impossible.
Exception :
Where, under a transfer of property, a person becomes entitled to an interest
therein upon attaining a particular age, and the transferor also gives to him
absolutely the income to arise from such interest before he reaches that age,
or directs the income or so much thereof as may be necessary to be applied
for his benefit, such interest is not contingent.
Illustration
'X' bequeathed his property i.e. estate to 'Y' until he shall marry to 'Z'. 'Y's
interest in the bequeath is contingent because it depends upon a condition
precedent i.e. a marriage of 'Y' with 'Z'. An event has no proprietary interest
in the estate and cannot alienate it.
But as soon as 'Y' marries with 'Z' his contingent interest becomes vested
interest.
Transfer to members of a class who attain a particular age (Check it
out... Transfer to class )
Section.22 provides..
Where, on a transfer of property, an interest therein is created in favour of
such members only of a class as shall attain a particular age, such interest
does not vest in any member of the class who has not attained that age.
Section.23 - Transfer contingent on happening of specified uncertain
event Where, on a transfer of property, an interest therein is to accrue to a
specified person if a specified uncertain event shall happen, and no time is
mentioned for the occurrence of that event, the interest fails unless such
event happens before, or at the same time as, the intermediate or precedent
interest ceases to exist.
Section.24 - Transfer to such of certain persons as survive at some
period not specified
Where, on a transfer of property, an interest therein is to accrue to such of

certain persons as shall be surviving at some period, but the exact period is
not specified, the interest shall go to such of them as shall be alive when the
intermediate or precedent interest ceases to exist, unless a contrary
intention appears from the terms of the transfer.
Illustration
A transfers property to B for life, and after his death to C and D, equally to be
divided between them, or to the survivor of them. C dies during the lifetime
of B. D survives B. At B's death the property passes to D.
Characteristics of contingent interest
A) A contingent interest is solely depending upon the fulfillment of a
condition.
B) If the transferee dies before obtaining possession the continent interest
fails and property revert to transferor .
C) Contingent interest is Transferable, whether it is heritable or not depend
upon the nature of such contingency.
Case Law 1) Sundar Bibi vs Rajendra Narayan AIR1925 All.389.
In this case the Allahabad High Court held that in a vested interest the title
passes absolutely from the transferor to the transferee at the date of the
transfer, though the enjoyment may be postponed.
2) Rajesh Kanta Roy vs Shrimati Sunita Debi AIR1957, S.C.255 Fact One Ramani Kanta Roy executed a registered trust deed in respect of his
properties. The eldest son Rajesh was appointed the sole Trustee to hold the
properties under the trust subject to certain power and obligation. After his
death his two son Rajesh And Ramendra got interest in the property. There
was a clause in the trust deed that both of them was to get interest in the
properties allotted to each other happening of the two events 1) Discharge of all the debts specified in the schedule and death of the
settler himself.
2) The trust was to come to an end on the death of settler and the son
were to get properties allotted to them there after.
Issue before the court was whether the interest created by the trust were
vested or contingent ?
A Supreme Court held that the interest taken by the two brothers under the
trust deed was vested and not contingent because it was certain event.
A contingent interest depend solely upon the fulfillment of the condition. In
contingent interest there is no present right, there is a promise to give right
upon the fulfillment of a condition. A contingent Interest is inalienable and
not transferable.

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Vested interest The Transfer of Property Act deals with two kinds of interest vested

interest and contingent interest. Vested interest is to be distinguished from

defeated by the death of the transferee even before getting possession of

becomes a vested interest, in the former case, on the happening of the

Where, on a transfer of property, an interest therein is to accrue to such of

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